2004 (4) TMI 328 - SC - Companies Law

Whether suit is not maintainable as no leave has been obtained under section 446 of the Companies Act? Whether the suit is barred by time? Whether defendant Nos. 2 to 5 are not liable for the suit amount because the management of forest lease was handed over to defendant Nos. 1 to 6 at the instance of the petitioner-bank? Whether the petitioner is entitled to any decree against respondent NO.1? Held that - Appeal allowed. The bank had pleaded a form of promissory estoppel in the plaint. Neither the single judge nor the Division Bench considered this plea nor whether such a plea was maintainable in law or established in fact. The opinion of the Division Bench that this agreements/assurances/guarantees as claimed by the respondent-bank which was alleged to have been entered into between respondent-bank, respondent No. 2 and the appellant State was a continuation of the agreement which was between the appellant State and the respondent-bank alone is in any event unsustainable. From this major premise, by a leap of faith and not of logic, the Division Bench came to the wholly fallacious conclusion that the provisions of section 122 did not apply.

Summary

Issues:
1. Suit maintainability without leave under section 446 of the Companies Act.
2. Suit time-barred.
3. Liability of defendants regarding forest lease management.
4. Entitlement of the petitioner to a decree against respondent No.1.

Analysis:
1. The appellant granted a lease to a company for felling trees, with royalty payment terms. The company was wound up voluntarily in 1972, leading to a suit filed by a bank in 1975 against the company and the appellant for repayment. The bank claimed an arrangement where the bank advanced funds to the company based on assurances by the appellant. The trial court held the suit was maintainable from the date leave was granted under section 446.

2. The trial court found the suit time-barred due to the delay in obtaining leave under section 446. The court concluded that the suit was barred by time against all defendants based on this finding.

3. The trial court addressed issues related to the liability of defendants regarding forest lease management. It found that the arrangement between the bank and the company was established as the bank's evidence was not cross-examined, and the appellant did not produce witnesses to refute the arrangement. The court held that the liability was solely on the appellant State.

4. The Division Bench distinguished previous decisions on leave under section 446 and concluded that the suit's filing date determined the limitation period. The bench focused on the bank's claim against the appellant State, not the company or its shareholders. The bank's claim against the appellant was decreed based on the evidence and findings of the trial court.

In conclusion, the Division Bench allowed the bank's appeal against the appellant State, quashing the decree against the appellant. The court found errors in the judgment, especially regarding the interpretation of section 446 and section 122 of the Constitution. The court highlighted inconsistencies in the Division Bench's reasoning and set aside the judgment, ruling in favor of the appellant.